ABS
Asset-Backed Securities. An investment security that is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables.
Accrual Rate
The rate at which interest is calculated.
Advance Payments
Payments made by the lessee at the inception of a loan or leasing transaction and/or thereafter to reduce the overall balance.
Annuity
A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. Fixed annuities guarantee a certain payment amount, while variable annuities do not, but do have the potential for greater returns.
APR
Annual Percentage Rate. The effective rate of interest, taking into account compounding and other fees, for a specified period (usually one year).
Asset
Any item owned by an individual or company that may be subject to a loan or lease and serve as collateral.
Backup Servicer
An organization skilled in the servicing of financial transactions who agrees to assume the servicing obligations from an existing servicer in the event of a failure on behalf of the existing servicer or the portfolio owner.
CFPB
Consumer Financial Protection Bureau. The U.S. agency responsible for consumer protection in the financial sector.
Collateral
Something pledged as security for repayment of a loan that is to be forfeited in the event of a default.
Custodian
A person or organization serving in a custodial capacity on behalf of a special purpose entity (SPE), interest holder, or indenture trustee.
Depreciation
A reduction in the value of an asset with the passage of time, often due to wear and tear.
Documentation Fee
A fee charged for preparing, distributing, and storing transaction documents in any financial transaction.
Economic Life (Useful Life)
The period of time during which an asset will have economic value and be usable.
Fair Market Purchase Option
An option to purchase leased property at the end of the lease term at its then fair market value.
FASB
The Financial Accounting Standards Board, which sets accounting rules in the United States, subject to certain oversight by federal governmental agencies.
FDCPA
Fair Debt Collection Practices Act. U.S federal law that governs debt collection practices.
Fixed Asset
A tangible asset, such as furniture, fixtures, or equipment held for business use.
Guarantee
An agreement by one party to accept responsibility for a financial obligation of another person. The guarantor’s obligation is generally triggered when the primary person or entity does not satisfy the guaranteed obligation.
Guarantor
One who guarantees a debt or obligation of another person or entity.
HIPAA
Health Insurance Portability and Accountability Act. A U.S. law that sets privacy standards to protect patients’ medical records and other health-related information.
Insurable Value
The agreed, stated, or other appropriate value of equipment or other capital assets after all exclusions, such as maintenance or service charges, that an insurance company will provide casualty or property insurance to cover losses or damage to the equipment or other capital asset.
Lease
A contract that includes an option for the lessee either to renew the lease at fair market rental value or to purchase the asset for its fair market value at the end of the lease term.
Lessor
The party to a true lease agreement who has legal, beneficial, or tax title to the equipment and grants the lessee the right to use and possess the equipment for the lease term.
Line of Credit
An arranged amount of credit that a lender may advance a borrower under various types of credit agreements. Such advances may be based on several factors, such as inventory, accounts receivable and equipment as collateral, and creditworthiness of the borrower.
Operating Lease
A business concept in which the lease lasts for the short-term use of equipment by the lessee. The finance company retains ownership of the equipment and expects the lessee to return it at the end of a term of three to 10 years.
Payee
In the context of a structured settlement, this is an individual who is receiving tax-free payments under a structured settlement and proposes to make a transfer of payment rights thereunder.
Payment in Advance
Payment made before the actual obligation arises for which payment is due.
Payment in Arrears
Payment made after the obligation has been satisfied.
PCI-Compliant
Payment Card Industry – Compliant. Adherence to the guidelines set forth by the PCI Standards Council for the purpose of managing the security of credit cards.
Periodic Payments
Servicer responsible for payment collection, cash management, and reporting of a loan or lease.
Primary Servicer
Servicer responsible for payment collection, cash management, and reporting of a loan or lease.
Purchase Option
A provision by which a lessee has the right to purchase the equipment at the end of the lease. The purchase option may be stated at a specified amount or at fair market value.
Refinance
To pay off an existing loan with a new one while using the same property as collateral.
Remarketing
The process of selling or leasing used capital assets by equipment management personnel on behalf of the lessor, loan holder, or independent party.
Residual Value
The value of an asset at the conclusion of a lease.
Sales/Use Tax
States impose sales taxes on retail sale transactions for tangible personal property that is used, consumed, or stored in the state.
Securitization
The financial practice of pooling various types of contractual debt, such as auto loans, equipment leases, or credit card debt obligations, and selling said debt as bonds or pass-through securities to various investors. The principal and interest on the debt underlying the security is paid back to the various investors regularly. Securities backed by other types of receivables are asset-backed securities (ABS).
Short-Term Loan
Loans usually structured to last one year or less and are often paid at the end of the term in a lump sum.
SSAE-18
Statement on Standards for Attestation Engagements. A set of rules for conducting an attestation of a financial service organization’s internal controls and issuing a System and Organization Controls’ report. One of the highest credibility certifications a financial service organization can obtain.
Structured Settlement
An arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim. Alsofor periodic payments in settlement of a workers’ compensation claim.
Syndications
Participation of financial institutions in a sale and/or assignment of all or part of an underlying lease or loan transaction. For example, the lease rentals from a transaction originated by a lessor may be assigned to another financier as collateral for a loan to the assigning lessor or as an outright sale of lease rental stream.
Tax Lease
Also called a True Lease. This is any lease in which the lessor is considered the owner of the leased equipment for federal income tax purposes as classified by Revenue Procedure 2001-28 (Rev. Proc. 2001-28).
TCPA
Telephone Consumer Protection Act. A federal statute to safeguard consumer privacy that restricts telemarketing.
Term Loan
Financing generally used for working capital, expansion, refinancing, and acquisitions. It is repaid monthly or at another agreed interval for a specified term.
Trustee
A bank or trust company that holds title to or a security interest in leased property for the benefit of the lessee, lessor, and/or creditors of the lessor, as appropriate.
Uniform Commercial Code (UCC)
A statute that prescribes very similar rules in almost every state in the U.S. for secured transactions, leasing, and other commercial and financial transactions. The UCC is intended to represent the best practices in commercial transactions and, in certain parts, consumer transactions.
Unsecured Loan
A loan that is not secured by assets but is based solely on the creditworthiness of the customer.
Use Tax
Many states charge a “use” tax in lieu of a sales tax when equipment is leased. In practice, instead of paying a sales tax for purchase of the leased equipment, the lessor collects or lessee directly pays use taxes with respect to each rent period as a percentage of the rentals over the lease term.
Useful Life
The period of time during which an asset will have economic value and be usable. The useful life of an asset is also called its economic life.
Vendor
An entity that sells goods and may provide services to customers.
